Disney

Disney:

The Disney case gave us a chance to draw a distinction between two schools of thought we might summarize as the “governance” school (ie Stern, Chicago, Kellogg – most top business schools) and the “process” school (fewer top schools which include Harvard, MIT). Disney was at a node in the mid-80s that merited dramatic action.

The governance school of thought was that Disney was suffering the malaise of loss of focus and lack of incentives. By breaking the company up into several companies – can tighten the link between effort and outcomes using each businesses own equity.

The process school thought that this firm was in dire need of process upgrades to exploit the potential synergies among the businesses.

• Processes for generating ideas

• Processes for producing quality products

• Processes for coordinating among divisions

• Processes for hiring the right people

• Processes for training those people

• Processes for improving the processes

Put a great idea into this machine and out would flow an unparalleled amount of revenues as the idea circulated though each of the spokes of this synergy temple.

There are two main points in this case:

1. The process school indeed scored points. With great processes, Eisner unlocked a lot of shareholder value. But what is confusing at first glance is that he unlocked so much value without any real attention to governance (level and structure of compensation/rewards and board controls over the c-suite). Eisner (much like Walt) followed more of a command and control model – he doled out rewards as he felt inclined – much like a benevolent dictator. While we can call Disney between the 1980’s and the end of the 1990’s a “process success”, it is also fair to point out that this business is idiosyncratic – employing artists means that being involved with the production of a great product is a reward in and of itself. A process for making the product great gives rise to good governance at...